Making Decisions about Your Business 7
Plan for Bad Debt
Family child care providers love to care for children each day, but we become
uncomfortable asking families for money owed for nonpayment. Working in this
business for a while, I have heard many reasons for late payments: “My check was
a little short this week.” “I didn’t get a chance to cash my check.” “I had car trouble
and needed to use the tuition to make car repairs.” I do try to show compassion
for my families, but constantly having late payments is simply intolerable. When a
family has a large outstanding balance, it weakens your relationship with them and
theirs with you.
As a preventative measure toward reducing the likelihood of bad debt, create
a payment schedule that requires tuition payments in advance. Making decisions
about how to address and collect debt will also help you enforce your policies.
The best strategy in reducing the “late payment syndrome” is to charge a late fee
the first time there is late payment. If families are aware that you will consistently
enforce your policy, you will see a reduction in late payments. Ensure that the late
fee will sting their pocketbooks. It is a consequence for not paying on time. Credit
card companies charge a high late fee to ensure their customers will make timely
payments. You want your customers to make timely payments as well. As the pro-
vider, you don’t want the stress of wondering if you will receive enough tuition in
a given week to pay your fixed expenses. You want to focus most of your time and
energy on the children. When addressing a late payment, I simply inform the family
that I have to maintain a quality environment for every child and must have the
tuition payment to do so.
There are several ways to collect outstanding balances. For example, you
might initiate a conversation about late payments:
“By the way, Ms. Jackson, I haven’t received your child care payment.”•
“Mr. Smith, I understand that the cost of child care is expensive. Just imagine •
how challenging it is for me to operate a quality program.”
“I would hate for Yasil to lose her placement because of nonpayment. She is •
doing really well here.”
You may also want to make a phone call or send an e-mail to remind families
of delinquent accounts. A written letter is the most formal approach; an example of
a missed payment letter follows.
Use whatever type of message you are comfortable with. At some point,
however, you will need to determine when terminating care is the only option.